A clear leader in online consumer choice and increasingly the hottest property of the digital age is digital music, and with the rollout of broadband and huge increases in distribution channels, the digital music boom is only going to get bigger.
Downloads hit the big time
The IFPI:06 Digital Music Report , released in February by the international recording industry, says single track downloads more than doubled to 420 million in 2005 generating a large chunk of the US $1.1billion in recording industries digital revenue. Still in its infancy , but with more than 335 legal online music services and at least two million tracks available to buy online, the industry expects further growth this year; Digital music is poised to become the significant driver in a new area of digital commerce.
IFPI CEO, John Kennedy says digital music sales are up more than twenty times on two years ago, and that excludes the burgeoning music to mobile industry.
He says digital sales have gone from practically zero to 6% of the recording industry’s global worldwide revenues within the past two years.
“This is great news for the digital music market and the wider digital economy. Record companies are licensing their music prolifically and diversely. A new wave of digital commerce, from mobile to broadband, is rolling out across the world. It is generating billions of dollars in revenues, and it is being driven, to a large extent, by music – by the people who create music, who produce it and who invest in it.”
Director General of IRMA, the Irish arm of the recording industry association, Dick Doyle, says Irish consumers per capita are the third largest consumers of legal music digitally, behind the United Kingdom and Switzerland and IRMA projects that digital music will account for 25% of music business by 2012.
Not all happy house
But it’s not all sweet music to the ears of those in the recording industry, he points out. The 20006 IFPI report also highlighted that in the industry’s two biggest markets the UK and Germany, for every six people in Europe downloading and accessing music legally, there are still five people who regularly swap files illegally. He says the recording industry‘s overall revenue is down around $5billion a year from where it was in 1999, due to illegal P2P services and illegal download sites, and the healthy growth in digital sales over the past year is going towards plugging the gap, but they are still a long way from putting things right. “Every person on the Net is connected to at least three million other people and the damage that is being done to the recording industry is frightening. That is why we are doing our best to promote the set up of legitimate services and part of helping those legal services is by suing the illegal ones.”
But despite a series of court judgments against unauthorised file sharing services and more than 14,000 individual claims before the courts globally, the IFPI estimates that there were 885 million copyright-infringing music files on the internet in January 2006, up from 870 million in January 2005 but down from 900 million six months ago.
Doyle says the industry is progressively working and will continue to bring action against those who obtain music files illegally, but it’s an uphill battle. He says he believes ISPs need to do more in managing their own networks, refuse service to those involved in illegal activities and take more control over what is happening.
Music on demand
There are now nearly 200 legal music services in total in Europe, with the six major players in Ireland being Eircom Music Club, Itunes, Connect, MyCokeMusic, Vitaminic and Wippit. The Itunes Music Store in Ireland has more than 2 million downloadable songs, 10,000 audio books, 2,000 music videos and 15,000 Podcasts, and claims to have 90% of the digital download market and is soon to pass its 1biliionth song download mark.
Portable players in demand
And if 2005 was the year for all this music is being downloaded to PCs and notebooks, it was also the year to buy a portable digital music device to play it on. The applications for the ever increasing list of digital music players from companies in Ireland such as Apple, Iriver, Creative, Dell and Rio are also on the increase with 2005 seeing the introduction of the portable video, products such as the Ipod Video bringing in the new portable video entertainment market.
Music to mobile
The mobile phone became a portable music device in 2005, and with the 3G music to mobile services offered in Ireland through Vodafone, ‘3’ and O2, it is expected the mobile music download market will take off within two years.
Vodafone says it already has 172,000 Irish subscribers to its 3G mobile download service and a recent estimate from Jupiter Research says that by 2010, 3G penetration will reach 60% in Europe.
The IFPI:06 Digital Music Report suggests the music to mobile facility might be where the most future growth is. Mobile technology is getting better and better and 2005 saw the launch of phones from major manufacturers with more storage capacity than some MP3 players. Recent recording industry research says globally one of five mobile phone users listens to music on their phone compared to 10% who use a portable music player.
Also in the IFPI report it says, although there has been some discussion about the music capable mobile phone being the “Ipod killer” there should continue to be the market for both to grow substantially. While portable music players have more music features (song storage, playback quality, battery life) in the medium term, for millions of consumers the mobile phone will become the preferred portable music device.
Other new channels
New potentially exciting digital distribution channels for music are in the pipeline too, such as podcasting and digital radio – but key licensing issues need to be resolved for these new channels to realise their market potential.
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